India's consumer inflation rose to 4.82% in August, edging past forecasts and marking a third straight month above the central bank's target. Food and fuel costs, aggravated by the Iran war's impact on oil markets, drove the increase and sharpened bets on an October rate hike from the Reserve Bank of India.
India's consumer price inflation rose to 4.82% in August from 4.45% in July, landing marginally above the 4.80% rise economists had forecast in a Reuters poll. The increase marks a third straight month above the Reserve Bank of India's 4% medium-term target, strengthening the case for a rate hike in October.
Food and transport costs lead the rise
Food inflation climbed to 5.95% in August from 5.52% in July, India's Ministry of Statistics and Programme Implementation said in a Monday release. Within that, rural inflation stood at 5.23%, while urban inflation came in at 4.31%. Transport inflation also accelerated, rising to 4.60% in August from 4.43% in July.
Oil prices compound the pressure
India imports nearly 85% of its oil needs, more than half of it from the Middle East, where the U.S.-Iran war has disrupted supply. Prices rose further after Saudi Arabia closed a key East-West energy pipeline following damage from a drone attack. As a result, Brent crude futures were trading near $108 a barrel, adding to the squeeze on India's import bill.
RBI weighs an October move
The central bank left its repo rate unchanged at 5.25% last month while keeping a neutral stance. Minutes from that meeting showed some RBI officials, including Governor Sanjay Malhotra, favoured a rate hike if inflation spread across segments. Markets are now pricing a 72% chance of an increase at the October meeting. The RBI expects headline inflation to reach 5% in the financial year ending March 2027, with core inflation at 4.3%.
Still, India remains an outlier among Asian peers such as Indonesia and the Philippines, which have already raised rates in response to higher energy prices and currency pressure.
Sources: US Top News and Analysis, Economy News, Investinglive RSS Breaking News Feed
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